Survey shows JIO led to fall in profitability on other telcos

Economic Survey results has come as a shocker with the increased share of telecom companies in the non-performing assets category after they witnessed a drastic fall in their revenue due to the entry of Relinace Jio. The gross revenue of Bharti Airtel, Vodafone India and Idea Cellular has seen a decline of 7.98%, 5.14% and 4.91% during the third quarter in 2016-17.

“Stiff competition, price war, reduced revenue have trapped telecom sector into highly leveraged with interest coverage ratio turning less than 1 since third quarter of 2016-17,” the survey said.

Jio’s pricing scheme has forced the other telecom companies to cut their voice and data rates to an average of less than 2 dollars but the worrying fact is that the share of the telecom sector in the non-performing assets (NPAs) has now increased, it said. With regards to over all percentage, the share has increased from 5 percent in 2015-16 to 8.7 percent in 2016-17.

The share of the sector in NPAs has increased despite decline in actual value to Rs 2,335 crore in 2016-17 from Rs 3,465 crore in 2015-16.

The survey noted that India has gone above US to become the largest smartphone market in the world after China with 275 million smartphone subscribers. Despite high spectrum charges, these companies were forced to reduce the tariff leading to fall in the profits. The survey said Telecom Regulatory Authority of India recorded 7.7 per cent quarterly growth in the subscriber base to 1,127.4 million at the end of third quarter of 2016-17.

“Reliance Jio Infocom recorded the highest net addition of 56.2 million subscribers which is much higher than other service providers like Idea (11.7 million) and Bharti Airtel (5.9 million) during third quarter of 2016-17,” the survey said.